Thursday, July 3, 2014

Mobster Nicodemo S. Scarfo and his business associate
Salvatore Pelullo were convicted today of looting more than $12 million from a
Texas-based mortgage company through a series of phony business deals and bogus
consulting contracts.

Scarfo, 48, the son of jailed Philadelphia mob boss Nicodemo
D. "Little Nicky" Scarfo, was described by the government as the
behind-the-scenes power in the secret takeover of FirstPlus Financial in 2007.

Pelullo, 46, an Elkins Park businessman with two prior fraud
convictions, was the point man in the scheme, according to authorities. A
wannabe wiseguy who quoted lines from The Godfather and brought a street corner
swagger to business meetings, Pelullo was accused of using threats and
intimidation to force company officials to do his bidding.

The anonymous chosen jury, which deliberated for parts of 10
days over two-weeks, also convicted former FirstPlus CEO John Maxwell and
Maxwell's brother, William, a lawyer who worked for the firm.

The verdicts were announced shortly after 11 a.m. to a
courtroom packed with friends and family members of the defendants and with
government officials. The process took more than twenty meetings as Judge
Robert Kugler read each of the 25 counts in the case and the jury foreman
declared "guilty" or "not guilty" to each charge faced by
each defendant.

Scarfo and Pelullo have been held without bail since their
indictments in November 2011. They showed little emotion as the process played
itself out. Scarfo heard the word "guilty" tied to his name 25 times.
Pelullo charged with one less count, heard it 24 times.

Both men, because of their prior criminal convictions and
because of their principal roles in the scam, face from 30 years to life when
sentenced by Judge Kugler. The verdicts capped a federal investigation that
began more than seven years ago and became public in May 2008 when the FBI
conducted a series of coordinated raids in Philadelphia, South Jersey, Miami
and Irving, Tx (where FirstPlus was based).

Authorities charged that the takeover of FirstPlus began in
the spring of 2007 when Scarfo and Pelullo began to maneuver for control of the
troubled mortgage company and at one point was a key player in the subprime
lending business but had subsequently fallen into bankruptcy.

Scarfo and Pelullo were accused to using fear and
intimidation to insert their own candidates on to the company board of
directors in the summer of 2007and were controlling the company by that point,
even though their names never appeared on any company documents or on filings
with the SEC and other government agencies.

Full of bravado and bluster, according to witness testimony,
Pelullo was involved in the day-to-day operations of the company and used his
own arrogance and allusions to his organized crime connections to instill fear
into those who balked at doing his bidding.

At one point, according to a company official who testified
during the trial, Pelullo threatened the official, telling him his wife would
be raped and his young daughters sold as prostitutes if the official didn't go
along with Pelullo's directions.

Testimony from former employees, including Cory Leshner a
top Pelullo associate who became a key prosecution witness, helped the
government build its case which was also based on hundreds of secretly recorded
phone conversations and thousands of pages of documents.

The jury verdicts were followed by the start of a forfeiture
proceeding this afternoon. The government is seeking a yacht and an airplane
purchased by Scarfo and Pelullo, a Bentley purchased by Pelullo and other
assets and bank accounts tied to the probe.

The readings of the verdicts came in a tense courtroom where
friends and relatives had become gathering earlier in the morning. The jury
panel had sent a note to Judge Kugler late yesterday afternoon announcing that
it was close to a consensus but wanted to sleep on its findings before
announcing them.

The verdicts announced for the racketeering conspiracy count
that topped the indictment set the stage for what was to follow. Scarfo,
Pelullo and the Maxwell brothers were found guilty, but Adler, McCarthy and
Manno were found not guilty. What followed was the recitation of the remaining
counts and as the jury foreman declared "not guilty" again and again
on separate fraud charges, friends and family members of Adler, McCarthy and
Manno began to smile and quietly nod to one another.

One friend of McCarthy's offered a quiet fist pump as he sat
in the third row of the packed courtroom as heard "not guilty"
announced to a securities fraud charge, 17 wire fraud charges and one
money-laundering charge that McCarthy faced.

The reaction was similar from friends and family members of
the other defendants. Manno's wife, Rita, broke into tears of joy after the
final "not guilty" was announced to one of the five charges her
husband faced. One of her daughters sat next to her, gently rubbing her back.

"A six-year ordeal is finally over," said Manno, a
veteran criminal defense attorney who had represented Scarfo for years.

Manno, who represented himself, said he never second-guessed
his decision. He said it gave him a chance to "personalize" the defendant.
Throughout the trial he spoke of himself in the third person and in a detailed
closing argument he hammered home the key point in his defense: he was a lawyer
trying to counsel Scarfo, not a member of the conspiracy. More important, he
argued and the government's own wiretaps appeared to confirm, neither Scarfo
nor Pelullo followed his advice.

Like the two other lawyers acquitted, Manno contended that
he was lied to by Scarfo and Pelullo and was never fully aware of what they
were doing behind-the-scenes at FirstPlus.

"They split the case the way we had argued for in a
severance motion," Manno said of the jury's verdict, referring to a motion
rejected by Judge Kugler who have Scarfo, Pelullo and the Maxwell brothers
tried together and Ader, McCarthy and Manno tried in a second trial.

Adler declined to comment as he left the courtroom, but
smiled and said any questions should be handled by his defense attorney Barry
Gross.

Gross, himself a former federal prosecutor in Philadelphia,
thanked the jury and the judge and said his client "looks forward" to
returning to his legal practice. Adler, based in New York, specializes in SEC
filings.

In a prepared release later in the day Gross, who works for
the Philadelphia law firm of Drinker, Biddle&Reath, said in a statement
released by the firm later in the day, "There was an enormous quantity of
information that the government presented in this case, but the jurors clearly
took their responsibilities very seriously and justice was finally achieved."

Manno said the same thing more succinctly. "It ended
the way it should have," he said, before heading off with his wife,
daughter and son-in-law to celebrate the outcome.

Neither Maxwell brother offered any comment. Both appeared
to numb as the guilty verdicts, one after another, mounted against them.

Before the jury came in, John Maxwell, who despite his
complaints about media coverage has consistently and graciously made himself
available to the media, said "It is what it is...As a kid I used to do
some bull riding. This can't be any harder than that."

T

hree other
defendants, lawyers David Adler, Gary McCarthy and Donald Manno, not guilty of
the charges they faced.

The government has alleged that mobster Nicodemo S. Scarfo
and his business associate, Salvatore Pelullo, secretly took control of
FirstPlus, a troubled Texas-based mortgage company, in 2007. The two then
orchestrated a series of phony business deals and bogus consulting contracts
that allow them to siphon $12 million from the company, according to the case
against them.

The money was used to support a lavish lifestyle.
Authorities allege that Scarfo and Pelullo bought a yacht valued at nearly
$900,000; that Pelullo purchased a $217,000 Bentley automobile, and that Scarfo
and his wife, Lisa Murray Scarfo, bought a $715,000 home near Atlantic City.

Throughout the trial, the defense has argued that FirstPlus
failed because of a poor economy and the negative impact of the federal
investigation which became public after a series of raids in May 2008. The
defense also argued that the government has used the specter of organized crime
to sensationalize the charges but insisted there was no mob involvement.

Thirteen defendants were originally named in a 25-count
indictment handed down in November 2011. Six defendants, including Scarfo's
wife, have pleaded guilty. She is awaiting sentencing on bank fraud charges
linked to a mortgage for the home near Atlantic City.

In addition to Scarfo and Pelullo, those on trial include
former FirstPlus CEO John Maxwell, his brother, William, who worked as a lawyer
for the company, and lawyers David Adler, Gary McCarthy and Donald Manno.

All seven are charged with racketeering conspiracy. Other
counts in the indictment include bank fraud, wire fraud, mail fraud, money
laundering and obstruction of justice. Not every defendant faces every count.
Scarfo and Pelullo also face weapons offenses.